Trouble at Yahoo

How Yahoo Lost Its Way

On Monday, Marissa Mayer’s tenure at Yahoo came to a whimpering end almost exactly four years after it began. Shortly before the markets opened in New York, Verizon announced a $4.83 billion deal to acquire Yahoo’s core Internet assets, including the company's email, media, advertising, and search properties, marking the end of an era for the 21-year-old Internet company that eight years ago rejected a $44 billion buyout offer from Microsoft's then-C.E.O. Steve Ballmer.

Now, Yahoo will be paired up with another once-beloved 90s relic, AOL, which Verizon bought a year ago for $4.4 billion, on the strength of their combined media and advertising businesses. But it’s over for Yahoo as an independent entity, and it’s almost certainly over for Mayer’s tenure, which could be described as both an era of stagnation and financial frivolity. Under her rule, Yahoo spent $3 billion in acquisitions, including $1 billion for the largely failed micro-blogging platform Tumblr. The company made a series of splashy and expensive hires, such as Henrique de Castro, an ad sales guru, who was paid $110 million for 15 months of of unspectacular work), as well as a coterie of high-priced journalistic talent whose work seemed lost on the portal. In the end, Mayer was never able to settle on one successful strategy to pivot Yahoo from a 1990s Web portal to something more enduring and dynamic. As a result, an exit into the hands of Verizon seemed the most logical, if unglamorous, eventuality.

In retrospect, Yahoo appeared felled by the rise of mobile. Though the company bought a significant number of apps and start-ups during Mayer’s tenure, the company failed to incorporate them into a broader mobile-first strategy. Its own core properties worked well enough—Yahoo Finance, for example, generates declining but substantial Web traffic for the company—but these verticals didn’t adapt for mobile, and Mayer failed to identify and enact a broader strategy to unite her existing stalwarts with the new businesses it purchased. Tumblr, for instance, has essentially been brought to a grinding halt through inaction. It was too little, too late.

Yahoo’s acquisition pattern illustrates the unremitting fact that technology changes at an unmatched pace. When the company launched, the Internet was a fundamentally different place; Yahoo served a need as a directory to a service that few people knew how to navigate on their own. But with the rise of other tech companies, like Google; increased user knowledge; and a flurry of ill-suited executives who could not decide on a suitable direction, Yahoo lost its way and failed to keep up. Now Verizon can monetize Yahoo’s stable of assets more cheaply than Yahoo was able to do itself, adding services like Yahoo Finance to its own bevy of media properties, including TechCrunch and The Huffington Post.

Mayer described the sale to employees in a Tumblr blog post Monday as “poetic”—and indeed, there is something poetic about one once-hot tech behemoth from the 90s joining forces with another. Like AOL, Yahoo cycled through a century of business vicissitudes over a 20-year span, ultimately falling victim to a new generation of disruptors, as it itself had once been. But Yahoo's sale also suggests the very maturation of an industry that Yahoo helped start. Mayer, who was once a wunderkind C.E.O. adored in the business press for her product intuit, is now likely to be replaced by professional managers and, perhaps more humbling, a former ad-sales guy—Tim Armstrong, her old Google colleague, who is the C.E.O. of AOL. For Yahoo, in the end, innovation lost out to practicality.